Reinventing Retirement - Women Underserved in Financial Planning

Ken Dychtwald, Ph.D., and Daniel J. Kadlec

Decades of steady gains in education and clout in the workplace by women are paying off for them in a big way: Women are on track to control 60 percent of wealth in the United States by 2010.Yet, amazingly, these strides haven't made women feel financially secure. Indeed, roughly half of all women worry about becoming a "bag lady" according to a new study by Allianz Life Insurance Company of North America unveiled this week.

Financial Insecurity

The study, called "Women, Money, and Power," is a wake-up call for the financial services industry, which has far to go in meeting the immediate financial and long-term retirement planning needs of female decision makers. The study of 3,183 U.S. adults (1,925 women and 1,258 men) revealed the following:

* Even though women are more educated, more involved in financial decisions, and control more wealth than ever, the vast majority (90 percent) feel somewhat or not at all financially secure.
* Women say financial security and freedom are 15 times more important to them than money-related status or respect.
* Women have a tremendous fear of losing all their money. About half have a fear of becoming homeless -- true even of those who earn more than $100,000 a year.
* A lack of financial know-how is four times more likely to be a barrier to women getting more involved in household finances than a lack of time.

These findings are starkly different from the attitudes expressed by men, and so an interesting conflict between the sexes is emerging.

Ultimately, we believe men and women will work things out as they always have -- and for the better of both. After all, with failing pension plans and wobbly Social Security benefits, retirement security is growing more elusive all the time. The increasing financial contributions of women should be applauded.

The Final Frontier

Today, almost two-thirds of women are in the workforce -- compared to just a third in 1950 -- and they're rapidly strengthening both their influence and earning power. In 2005, more than 2 million women earned over $100,000 -- a fourfold increase in just a decade. Sixty percent of women with business degrees and 75 percent of executive women working for Fortune 500 companies out-earn their husbands.

Almost all income growth in this country over the last several decades has been among women. Between 1970 and 2000, women's median real income growth rose over 60 percent, while median real income for men rose less than 1 percent. The continued ascent of women's influence in political, business, and economic spheres seems almost guaranteed.

But what about in the financial world? Money and investing is perhaps the last and most important frontier in gender equality. As the financial services industry reshapes to respond to women's new power and position, it requires a new understanding of their distinct concerns and priorities.

No Prince Charming on the Horizon

The Allianz study, overseen by Harris Interactive and Age Wave (of which Ken is founding president and CEO), highlights the key motives of women when it comes to investing and financial planning. For them, achieving security and peace of mind tops the list. Only 10 percent of the women in the study said they feel extremely financially secure, and half said they fear losing everything. While male investors often tend to fancy themselves as "warriors," many women think of themselves as "worriers."
The traditional model, in which men act as providers who rescue women in their hour of financial need, remains surprisingly pervasive in our culture. However, it's clearly no longer viable. Women often have equal or greater earning power than their husbands, and rising divorce rates and family fragmentation mean both spouses must be prepared for self-reliance. The era of women seeking to marry into financial stability has come to an end.

Neglect and Disharmony

Our society has been slow to catch up to this new reality. Fewer than 1 in 5 women, and only 1 in 25 men, say they teach their daughters to be financially independent. Women's media is almost devoid of financial education and outreach: An audit of the top 10 women's magazines revealed that just 3 percent of editorial content is related to finances, and just 1 percent of advertising is for financial products or services. Meanwhile, almost 60 percent of women say they wish they'd learned more about money and finance in school.

The way couples and families relate to money and investing is also being transformed. As we move from a model where the husband is the primary decision-maker on financial and investment issues to a new reality where decisions are made jointly, spouses often struggle with misunderstandings.

Money is the major cause of disharmony in marriage today: The women in the Allianz survey reported that money is almost 20 times more likely than sex to be the biggest source of conflict with their husbands. Most often, these arguments revolve around a lack of savings and financial security.

Not surprisingly, then, the study found that women often take savings into their own hands. One in five women report having a "secret stash" of savings their husbands don't know about, and women are almost twice as likely as men to advise younger women to put away money that's just theirs.

Our Money, Ourselves

Despite all these challenges, women today continue to revolutionize their role in money and investing. And as they pioneer a new relationship with money, they're venturing into unknown territory.

What role should they assume? The "Women, Money, and Power" study asked women which of the five fictional characters they most identified with when it came to financial matters. Here's how they responded:

* "Cinderella": 8 percent of women hope that Prince Charming will make everything OK and feel they lack sufficient knowledge to make smart financial decisions.

* "Alice in Wonderland": 17 percent of women are overwhelmed and confused by the financial choices they have to make, and are inclined to avoid financial responsibility.

* "Wonder Woman": 18 percent of women feel capable of handling whatever comes their way; feel confident, empowered, and knowledgeable about money and investing; and are likely to work with a financial adviser.

* "Belle" (from Beauty and the Beast): 23 percent like to handle things equally with their partner, and are communicative and very happy with their marriage as far as household finances are concerned.

* "Goldilocks": 35 percent of women thoroughly research their options before making financial decisions, and are confident, analytical, and highly knowledgeable about household finances.

The Next Revolution

Over the next decade, the financial services industry will increasingly adapt to the distinct needs of women. In general, women express that they want less worry, more conservative investments, greater financial security and predictability, more simplicity, and easier access to understandable financial information.

The financial "gender revolution" will likely be just as complex and challenging as women's past transformations of politics, the workforce, and family life. But the enormous economic contributions of women -- and any changes it foments -- should be welcomed by all.

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